Harvard Business Review - 2004.07,08.pdf

Foret h o u g h tTHINKING ABOUT.What Every CEO Should KnowAbout Creating New BusinessesDecades of research agrees-growth ultimately means starting new businesses.Thats not easy,more for cultural than economic reasons.by David A.GarvinSome problems,wrote Laurence)Peter,theFortunately,scholars have studied the probbusiness humorist,are so complex that youlem for decades.And whether theyve called ithave to be highly intelligent and well informednew business creation,corporate venturing,just to be undecided about them.Top-linecorporate entrepreneurship,corporate innogrowth is one of those,especially when it comesvation,orintrapreneuring,their observationsto creating new businesses within large,com-have been remarkably similar.Yet these findingsplex companies.The challenges are vast,and itshave seldom been summarized or presented indifficult to know how,or even whether,to movean easily accessible form.Here,then,is a primerforward.Most CEOs would benefit from havingon the topic-the ten things every corporate ven-a few rules of the road.turer should know.1Ultimately,growth means starting newbusinesses.Most firms have no alternative.Sec-tors decline,as they did for Pullmans railroadcars and Singers sewing machines.Technologyrenders products and services obsolete-thefate Polaroid suffered,as digital cameras deci-mated its instant photography franchise.Mar-kets saturate,as Home Depot is now finding,after establishing more than a thousand storesnationwide.2Most new businesses fail.New businessesmay be necessary for long-term growth,but suc-cesses are hard to pull off.The numbers aredownright depressing.In the 197os and 198os,60%of small-business start-ups failed in theirfirst six years.Large companies did only a bitbetter.A study of sizable corporations duringthe same period,which included such household names as DuPont,Exxon,IBM,ProcterGamble,Sara Lee,3M,and Xerox,found thatthey divested or closed 44%of their internallygenerated start-ups and 50%of their joint ven-tures in the first six years.18HARVARD BUSINESS REVIEW